Grow a backbone and Privatize the LCBO Already.

I wrote this shortly after the Ontario Liberals took power, while they were first floating the idea of privatizing the LCBO. They almost seemed like they were going to be brave back then, but the Unions put them in their place and showed them who was boss.

So if you want to know WHY the Liberals aren’t taking the most recent report on the LCBO seriously, it’s no big mystery. The Liberal party of Ontario is TERRIFIED of the unions.

Simple as that.

Let’s Privatize the LCBO

The Ontario Liquor Boards Employee’s Union (OLBEU) has begun a public relations campaign to try to prevent the Liberal government from selling off Ontario’s liquor monopoly.

Since there is no equally powerful lobby for the other side of this debate, it is unfortunate that the people of Ontario will only hear one side of the argument. There is, in my opinion, a strong argument for privatization of the LCBO.

As someone who lived in Alberta before and after the privatization of the Alberta Liquor Control Board (ALCB), I know that the horror stories the unions have spread about privatization are false. Government revenues did not decrease, prices did not increase, selection did not decrease, nor did the increase in availability in alcohol create societal problems.

And I write this as a person whose family’s main breadwinner at the time was an EMPLOYEE of the ALCB. Privatization is GOOD for retailers, for provincial residents and for breweries and wineries. Just maybe not so good for unions. But heck, they’re all socialists. Shouldn’t they offer to do without for the greater good?

What’s the government doing in the booze business anyway?

Prohibition in Ontario existed from 1916 to 1927. The results here were similar to those elsewhere – the black market thrived and ordinary citizens casually broke the law whenever and wherever they had the chance.

When prohibition laws were repealed, rather than learning the lesson that you can’t legislate your own peculiar version of morality, the LCBO and LLBO were created along with slightly insane and incredibly inconvenient regulations designed to keep the masses safe from the eternal damnation that would likely result if normal citizens had free access to alcohol.

For example, until about 1970, Ontario’s bars were required to have a separate Ladies entrance and a room where escorted gentlewomen might enjoy a beverage with a respectable male companion. Otherwise, alcohol-inflamed men might endeavor to take liberties… horrors! Likewise, lest maddened drinkers fall to unseemly brawling, it was forbidden for a patron in a bar to ever stand up with drink in his hand. If the patron wanted to move to another table, the waiter would have to carry his unfinished drinks for him. These measures finally ebbed well in the mid-1970s. Limits on glass sizes for draft beer, and the numbers of drinks per person allowed on a table lasted into the 1980s….. war-time rationing effects on alcohol also extended well
into the 1950s at LCBO stores. A customer could leave with two bottles of spirits or two cases of beer, nothing more. [Mackenzie Institute, “Prohibition’s Hangover — Ontario’s Black Market in Alcohol” October 1997]

And so here we are, in the twenty-first century, stuck with a government monopoly on liquor that has its roots and reasons in Methodist religious beliefs. Its remarkable staying power is due to the fact that, no matter how ill-managed and corrupt it gets, the LCBO continues to produce profits for the province, and every time a party tosses out the idea of privatization, the union pulls out a public relations campaign that somehow makes Ontarians forget that there is no valid reason their government should be in the booze retailing business.

The unions say that privatizing will give up 1 billion in annual profits in order to achieve a one-time cash infusion. Will
privatization hurt the province financially?

Looking at the Alberta example, it clearly does not have to be that way. Alberta set a flat tax on liquor based on the percentage of alcohol, promising both the new private retailers and consumers that it would not gouge them. The tax was designed to be revenue-neutral to the government. They would make about the same amount from the privatized sale of alcohol as the ALCB generated under the public system.

The Canadian Taxpayer’s Association reported that:

“The Alberta government suffered no revenue loss after introducing a full competitive liquor retail market, and has in fact reduced it’s markup four times since privatization because of that government’s promise to keep the privatization switch revenue neutral to government.”[Canadian Taxpayers Federation March 2002 study]

Alberta collected over 500 million dollars from the taxes on liquor last year. Given the size and population differences of the two
provinces, it seems clear that Ontario could quite easily get their billion or more by following the same scheme.

They say Ontario wineries won’t be protected under a free market, and consumers will be faced with a reduction in the variety and selection of wines and spirits.

Opponents of privatization claim that the move will lead to less selection for consumers. Alberta’s experience suggests just the
opposite. Between September 1993 (when the Alberta Liquor Control Board announced it would sell its stores) and 1995 the total number of liquor products available to Alberta consumers increased by seventy-two percent — from 3,325 in 1993 to nearly 6,000 in 1995. [Margaret Swaine, “Spirit of the West;” Toronto Life, December 1995]

Opponents of LCBO privatization will also suggest that one of the key mandates of the LCBO is to promote Ontario wines. It would seem, then, that vintners would be staunch supporters of a public LCBO. The reality, however, is that the LCBO monopoly has led to inflexibility, bureaucracy and red tape which makes it difficult for new Ontario wines to get introduced, and is damaging to the businesses of both grape growers and vintners.

Allan Schmidt, general manager and co-owner of Vineland Estates Winery in Vineland, Ontaro says his winery launches its new wines in Alberta and only tries to get them listed at the LCBO after building recognition in that more open market. “As an Ontario resident and entrepreneur, it makes me sick that I don’t have retail access to my own market,” he told the Financial Post.
“The shame of the LCBO,” laments Mr. Schmidt, “is that it’s impossible for a small Ontario winery to build a brand in Ontario. The LCBO is the only show in town.”

What about ‘Social Responsibility’? The anti-privatization lobby suggests Ontarians would go on a crime spree if alcohol sales were privatized.

The Ontario Legislative Research Service researched the social aspects of privatization in a 1997 issue paper.
The document describes one study from Iowa that found that “wine and spirit sales were not significantly affected by privatization. This same study found that privatization did not cause an increase in either heavy drinker or problem drinker rates even with the initial increases in consumption.”

The Mackenzie Institute proposed, in a 1997 paper, that the existence of the LCBO might be a key contributor to some crimes: “by controlling wine production, the LCBO may actually be contributing to the black market. Disappointed producers are left with surplus pails of juice that can be diverted into contraband production – sometimes by the wineries themselves.”

So will Ontario go to hell in a handbasket if alcohol sales are freed from a crown monopoly? Of course not. The church ladies of the province can rest assured that we’ll probably drink the same amount as before, and as a bonus, we’ll have a few extra pennies to drop into the collection plate on Sunday to atone for our sins.